Why is AMD using non-GAAP financial measures so extensively?

AMD is using non-GAAP financial measures to provide investors with a more comparable view of its ongoing operating performance. These measures exclude certain items that management believes are not indicative of core business operations, such as gains/losses from asset sales, legal settlements, restructuring charges, and the impact of accounting for its investment in GLOBALFOUNDRIES Inc. (GF).

What significant one-time events are impacting AMD's financial results?

Key one-time events include a non-cash gain of approximately $325 million recognized in Q1 2010 related to the fair value assessment upon deconsolidating GLOBALFOUNDRIES Inc. (GF). Additionally, the company recorded significant gains from legal settlements: $283 million in Q4 2010 and $1.242 billion in Q4 2009 from an Intel settlement, plus a $25 million gain from a DRAM settlement in Q4 2009. These are excluded from certain non-GAAP measures.

How has the company's relationship with GLOBALFOUNDRIES (GF) changed and how does it affect reporting?

AMD deconsolidated GF's results of operations starting in Q1 2010 and now accounts for its investment in GF using the equity method. This means GF's financial results are no longer directly included in AMD's consolidated GAAP statements, but AMD reports its proportionate share of GF's net income or loss. This change necessitates the use of specific adjustments and non-GAAP measures to present a clearer picture of AMD's core operations excluding GF's performance.

AMD 8-K: Earnings & Results & Regulation FD

Q: What is the main purpose of this 8-K filing?

The main purpose of this 8-K filing is to announce and provide details on Advanced Micro Devices, Inc.'s financial results for the fiscal quarter and year ended December 25, 2010. It also serves to explain the company's use of non-GAAP financial measures and how these differ from GAAP reporting.

Summary

This 8-K filing by Advanced Micro Devices, Inc. (AMD) on January 21, 2011, primarily concerns the company's financial results for the fiscal quarter and year ended December 25, 2010. A significant aspect of the filing is the detailed explanation of the company's use of non-GAAP financial measures. AMD is presenting these measures to provide investors with a clearer view of its core operating performance by excluding items such as the deconsolidation of GLOBALFOUNDRIES Inc. (GF) results, legal settlements, and amortization of acquired intangible assets. The company is also providing context on how it has transitioned to accounting for its investment in GF using the equity method since the first fiscal quarter of 2010, and how this impacts its financial reporting. The filing details adjustments made to GAAP figures to arrive at various non-GAAP metrics, including non-GAAP net income, operating income, gross margin, and Adjusted EBITDA, aiming to offer a more consistent comparison across reporting periods.

Key Highlights

1AMD reported its financial results for the fiscal quarter and year ended December 25, 2010.
2The company is extensively using and explaining non-GAAP financial measures to provide investors with a clearer view of core operating performance.
3Key non-GAAP measures discussed include non-GAAP net income (loss), operating income (loss), gross margin, and Adjusted EBITDA.
4AMD details the adjustments made to GAAP figures, including exclusions for GF-related items, legal settlements, amortization of intangibles, and restructuring charges.
5The company deconsolidated GLOBALFOUNDRIES Inc. (GF) in Q1 2010 and is now accounting for its investment in GF under the equity method.
6Significant one-time items impacting the comparability of GAAP results include a $325 million non-cash gain from the deconsolidation of GF and substantial legal settlement gains ($283 million in Q4 2010 and $1.242 billion in Q4 2009).
7The filing notes the upcoming termination of supplier agreements with IBM Credit LLC in February 2011, which will change the calculation of non-GAAP adjusted free cash flow.

ADVANCED MICRO DEVICES INC 8-K Report, Financial Results (Jan 21, 2011)

Summary

Key Highlights

Frequently Asked Questions